Foreign Relations of the United States, 1952–1954, Western European Security, Volume V, Part 1

Conference files, lot 59 D 95, “London–Lisbon on German Relations”

Report by the Allied High Commission for Germany to the Foreign Ministers of the United States, the United Kingdom, and France ¹

secret
HICOM/P(52)10/Final

[Bonn,] 12 February 1952.

Status of Contractual Relations With the Federal Republic

i. introduction

1. Since the meeting of the Foreign Ministers and the Federal Chancellor in Paris in November 1951² considerable progress has been made in the negotiations with the Germans of the contractual agreements. The following report is intended to summarize the present state of the negotiations and, in particular, to indicate those points outstanding which should be resolved by the Foreign Ministers themselves. These problems, which are listed in Part II, include points on which there is tripartite disagreement and points on which there is disagreement between the High Commission and the Chancellor. Annexed to the Report are brief summaries³ of the present status of each of the “Related Conventions” which complement the General Agreement approved in Paris on November 22, 1951.⁴ Draft texts of the Conventions themselves are being forwarded separately.

2. The High Commissioners desire briefly to describe the present political situation in the Federal Republic. It is the aim of the Chancellor to show that the complex of agreements which he is now negotiating (including the present contracts and the treaty creating the European Defense Community) will give Germany equality of rights. The thesis of the SPD and the rest of the Opposition is, of course, that, far from achieving equality of rights, they perpetuate the Occupation, do not give Germany equal partnership and ought to be rejected. The attitude of all parties is influenced by the problems of the unification of Germany and by anxiety about the financial burdens of defense.

3. The views of the Bundestag took concrete form in the adoption on February 8 of a series of resolutions proposed by the Coalition parties, expressing a willingness to cooperate in the common defense, through the European Defense Community, but only as “an equal partner”.⁵ In other respects, the resolutions are chiefly devoted to specific problems, many of which show concern over equality of rights. In general, these resolutions (the texts of which appear as Annex A to this Report⁶) are worded in terms sufficiently moderate and general or have sufficient escape clauses to leave the Chancellor reasonably free to meet the Allied requirements.

4. The following are the only points on which it appears certain that difficulties will arise:

(a) The Bundestag asks for the release of all war criminals not convicted of a crime in the traditional meaning of the word. It also asks that a review of the individual cases take place without delay;

(b) The Bundestag categorically rejects any unilateral limitation of industrial production or research;

(c) The Bundestag asks that the German financial contribution to defense should be assessed in accordance with the criteria applied to other countries. It asserts, in this connection, that the present German tax burden is the heaviest in Europe; and, which is more serious, it demands that the cost of aid to Berlin should be included in the German contribution and that the expenditures for the troops stationed in Germany should come out of the contribution to EDF.

5. One other factor, involving both legal and political considerations, should be drawn to the attention of the Foreign Ministers. The SPD and other elements of the Opposition contend that the Basic Law now prohibits rearmament and conscription, so that German participation in the common defense requires amendment of the Basic Law. The SPD has referred this question to the Constitutional Court, which, however, may hold itself unable to determine the problem until a Law is actually before it. Should the Court now or later support the contentions of the SPD, it would mean in effect that no German defense contribution would be possible without the consent of a ⅔ majority of the Bundestag and Bundesrat, i.e., requiring in turn the concurrence of the SPD. Without going into the merits of the legal arguments advanced by the Coalition and the SPD, it is impossible to discount altogether the possibility that the Court will uphold the latter.

ii. points submitted for resolution by the ministers

A. Subjects on Which Tripartite Agreement is Needed Before Discussion With the Federal Chancellor

1. War Criminals (Convention on Acts and Interests) On this subject, on which the Bundestag approved a separate resolution (see Introduction, paragraph 4(a) above), the Chancellor is being advised that the Three Powers are prepared to turn over custody of the war criminals to the Federal Republic, if it will accept the judgments and will agree to carry out the sentences. He has also been told that the Three Powers contemplate a mixed Clemency Board consisting of an equal number of Germans and of representatives of the Three Powers. The Board would presumably consist of six members, three being Germans and one representing each of the Three Powers.

Beyond this, it has been impossible to go because of inability to reach an agreement tripartitely.

There are, in effect, two disagreements between the Allies which are submitted to the Foreign Ministers:

(a) Authority Exercising the Right of Clemency: Role of Clemency Board

The U.K. High Commissioner is of the opinion that the right of clemency should be exercised by the proposed Clemency Board itself.

The U.S. High Commissioner believes that the granting of clemency is the right and a normal function of the convicting Power, and that the Clemency Board should consequently have power only to make recommendations.

The French High Commissioner considers that the right of Clemency should be exercised jointly by the Three Allied Powers; but he is ready, if necessary to reach tripartite agreement, to accede to the point of view of his U.S. colleague in this respect. He believes, however, that a unanimous recommendation of the Board should be binding on Governments.

(b) Procedure of the Board

The U.K. High Commissioner is of the opinion that the Board should normally act in panels composed of a German and a representative of the convicting power, and the U.S. High Commissioner is prepared to accept this position if the Board’s recommendations are advisory only.

The French High Commissioner, on the other hand, believes that the Board should always act as a single body.

2. Security Safeguards

At the meeting with the Federal Chancellor at Paris on 22 November, the Foreign Ministers indicated to him that certain limitations must be accepted by Germany in the field of manufacture of armaments and aviation and in the scientific research relative to them. It was then agreed that the High Commissioners in Germany should seek a solution in subsequent discussion with the Chancellor.

On 26 November, the High Commissioners stated to the Federal Chancellor that the Federal Government must agree not to manufacture certain arms on the one hand, and, on the other hand, to submit certain scientific research to control, either by means of an appropriate provision in the Convention on General Relations, or by accepting a special Convention to be included as one of the related Conventions.

The Federal Chancellor categorically refused any commitment of this nature; he emphasized that such a request constituted a discrimination against his country which was contrary to the principle of equality on which the European Defense Community was based. He stated that the requirements of the Allies were covered by provisions in the draft EDC Convention, and he was prepared to extend his obligations under these provisions to the U.S. and U.K. Governments by an exchange of letters.

As a result of this attitude of the Federal Chancellor, the question was further discussed by the Three Allies at Governmental level, but it did not prove possible to reach unanimous agreement thereon. It was then agreed that the French Government should discuss the question directly with the Federal Government. These discussions likewise produced no further result.

Following this refusal, a new discussion took place at the Governmental level in Paris on 2 February. The French representative submitted to his colleagues the text of a protocol which should be annexed to the Convention on General Relations and approved by the Bundestag at the same time as the rest of the contractual arrangements.

Before the U.K. and U.S. Governments had given their opinion on this proposal, the question was raised again with the Federal Chancellor in the course of the meeting with the High Commissioners on 5 February. The U.S. High Commissioner, as Chairman, submitted to the Federal Chancellor, purely as a basis for discussion, a document which laid down the following three principles:

(1) The Allied controls on German industry would be lifted and the Military Security Board would be abolished at the date of the entry into force of the Conventions.

(2) The Federal Government would declare that in order to give a strictly defensive character to the participation of the Federal Republic in defense and in order to take into account the international situation, it would not permit the production in the Federal Territory of certain items and would take all necessary measures to forbid scientific research on experimental models or on any other form of the items in question.

(The list of items involved was left blank.)

(3) The Federal Government would not permit the creation on its Territory of military or para-military forces other than those which constituted its contribution to the European Defense Community.

The strength of the police forces directly subordinated to the Federal Government would be fixed at a specific figure.

The Federal Chancellor once again categorically refused any limitation which would not be applicable to the other countries forming part of the European Defense Community. He re-stated the position which he had taken on 26 November 1951. He objected particularly to the Allied demands concerning police and para-military formations, which had not been involved in the previous discussions, and to which M. Francois-Poncet had only made a reference after the Washington Conference on 24 September 1951. The Governments are therefore faced with the following problems:

(1) What attitude to adopt as a result of the position taken by the Federal Chancellor?

The Federal Chancellor considers that the provisions of the Convention on the European Defense Community with regard to the manufacture of arms and forces not included in the Community completely satisfy the Allied desires in this direction. He maintains in particular that the provisions are in full accord with the commitment made by Herr Blank in his discussions with the Allied representatives at the Petersberg in February and May 1951. (Herr Blank had stated in effect that Germany was prepared to renounce all armament production and would not carry on such production except upon the specific request of France.)

The Federal Chancellor refuses to accept any restriction; he is however prepared to give official notification to the U.S. and U.K. Governments, at the time of signature of the Convention establishing the European Defense Community, that the Federal Government considers that those provisions of the Convention which relate to armament are also binding on the Federal Government vis-à-vis the United Kingdom and the United States. Meanwhile, the Bundestag has adopted a resolution rejecting any unilateral discriminatory restrictions on industrial production and research.

The French and U.S. Governments would hope to obtain from the Federal Government the signature of a protocol which would have the same validity as contractual arrangements and, in the view of the French, should be annexed thereto. The U.K. Government would be satisfied with a unilateral declaration by the Federal Government.

(2) What limitations do the Allies wish to impose on the Federal Republic?

(a) With regard to para-military formations and police;

(b) With regard to armament manufacture.

The prohibitions involved in (b) are the following:

(i) Atomic weapons,

(ii) Chemical and biological weapons,

(iii) Naval vessels other than minor defensive craft,

(iv) Military and civilian aircraft,

(v) Guided and long-distance missiles, (vi) Heavy military equipment,

(vii) Scientific research on experimental models or on any other form of the above items.

There is disagreement between the Three Allied Governments on items (iv) and (vi). With regard to item (iv), the U.S. Government is ready to accept the manufacture of civilian aircraft.

With regard to item (vi), the French Government wishes to prohibit the manufacture of all propellants and gun barrels exceeding a calibre of 105 millimeters. The U.K. Government would not insist on this prohibition but would not oppose it if the Germans were willing to accept it. The U.S. Government is opposed to any limitations in this field of production.

B. Other Subjects On Which There Is Disagreement Between the High Commission and the Federal Chancellor

1. Composition of the Supreme Restitution Court: Obligation of Federal Republic to Satisfy Restitution Judgments Against the Former Reich. (Convention on Acts and Interests, Part III)

Two separate questions arise under Part III of this Convention (Internal Restitution) and the Charter of the Supreme Restitution Court annexed thereto.

The first question relates to the composition of the panels of the Supreme Restitution Court which is to replace the three zonal Courts now in existence. The Allies propose panels consisting of three judges appointed by the Power concerned and two Germans appointed by the Federal Republic, whereas the Germans propose a court composed of an equal number of Allies and Germans and one or more neutrals. The instructions from the London Study Group (IGG/P(51)89 Final, Annex B to Appendix I)⁷ recommended a court with an Allied majority in the proportion indicated, although they authorized the Allies to recede to a court composed as proposed by the Germans.

This question was referred to the High Commissioners and the Chancellor. The Chancellor, while expressing the view that the retention of Allied majorities on the court might encourage anti-Semitism, said that, if the Three Powers insisted, he would accept the three-to-two arrangement. At a subsequent meeting, however, he reverted to his original objection to the composition of the court and linked this question with a second and unrelated one.

This second question relates to the obligation which the Federal Republic is asked to assume (under Article 5 (a) of Part III) to ensure the satisfaction of restitution awards against the former Reich. The Germans are not prepared to accept this undertaking unless the obligation is made dependent upon the Federal Republic’s capacity to pay. The Allies insist that the obligation to pay should be unconditional, but have proposed that the Federal Republic’s capacity to pay could be taken into consideration in determining the time and method of payment.

The Chancellor discussed both questions on political and financial grounds. He referred to his experts’ estimates of liabilities ranging from 5 to 7 billion DM. He stated that his difficulties would be considerably lessened if the amount were not so high, mentioning a range of from 1 to 2 billion DM. An Allied analysis of the German report, showing that the actual liability is substantially under 1 billion DM, was submitted to the Germans on 11 February.

2. Exemptions From Equalization of Burdens Taxation (Convention on Acts and Certain Interests, Part X, Art. 6)

This problem involves both the extent of the exemption to be accorded from the special capital levy taxation designed, among other things, to meet charges arising out of the war or out of reparation or restitution, and the categories of persons and corporations entitled to exemption.

The proposed Federal Equalization of Burdens Tax will be payable over a thirty-year period from 1949 to 1979. It will supersede, with retroactive effect, the so-called Immediate Aid Tax which has been in effect since April 1, 1949.

As to the period of exemption, the Allies have asked for six years out of the thirty, beginning with 1949. This was based on the fact that the proceeds of the tax are to be used for certain social purposes inside Germany, in addition to the war damage purposes. The Germans originally proposed limiting the exemption to three years.

As to the categories of persons entitled to exemption, the Germans have offered to exempt from this tax the same categories of persons as now in effect enjoy exemption from the Immediate Aid levies; namely, United Nations nationals, corporations organized under the law of any United Nation, and corporations organized under German law which are 95% or more U.N. owned. The Allies proposed extending this exemption as follows:

(a) As to United Nations nationals, altering the qualifying dates for holding United Nations nationality so as to widen this category;

(b) Exempting certain persons who hold both United Nations and German nationality;

(c) Exempting certain victims of Nazi persecution now living abroad who do not have United Nations nationality;

(d) Exempting to the extent of the United Nations interest therein certain corporations organized under German law which are less than 95% UN owned.

The Chancellor has proposed as a compromise an exemption for six years of the persons and corporations included in the categories proposed by the Germans.

3. Compensation for German External Assets Taken in Safehaven Countries (Convention on Acts and Certain Interests, Part VI)

The Federal Republic is willing to undertake to pay compensation to a German whose property was seized for purposes of reparation “in accordance with its financial capacity and in accordance with the Basic Law” (Part VI, Article 4). The Allies proposed an undertaking, applicable only to assets in Safehaven countries (Portugal, Spain, Sweden and Switzerland), whereby the Federal Republic would pay compensation in accordance with provisions of agreements between the Allies and the governments of those countries. The Germans made the objection that under Article 3 of the Basic Law all former owners of German external assets must receive equal treatment, which would mean that the present agreement must provide the same measure of compensation for German assets in all countries. In addition to the constitutional argument, the Germans make the practical point that the Bundestag is unlikely to ratify a provision which would result in payment of full compensation to a German whose assets were located in Spain and much lower compensation to a German whose assets were located in France. The Germans contemplate that the compensation actually paid will necessarily be small in relation to the value of the property taken.

The undertaking proposed by the Germans is, of course, acceptable as to assets taken in countries other than the Safehaven countries above mentioned. In the case of these countries, however, the Three Powers have entered into agreements which contain obligations to ensure provisions for compensation in terms which envisage more nearly complete compensation to those German owners than would be paid by the German formula.

This question was referred to the High Commissioners and the Chancellor. The Germans proposed that the Convention should provide for compensation of all former German owners by the Federal Republic but leave the working out of details of such compensation to be handled subsequently, in no event later than the Peace Treaty. The proposal contemplated that the Federal Government be permitted to negotiate directly with the Safehaven countries involved, with the Allies participating in the negotiations.

4. Convention on Financial and Economic Contribution

The Foreign Ministers should also consider such differences respecting the Convention on Financial and Economic Contribution as may arise as a result of the discussions between representatives of the Federal Republic and the “Three Wise Men”.⁸ Although it is not possible at present to predict and describe such differences, it is clear from the Bundestag Resolutions that they will include the questions whether the German financial contribution will be made only to the European Defense Community, which will reallocate a part of it to non-EDF powers having forces stationed in Germany, and whether the Federal Republic’s expenditures in support of Berlin are to be treated as part of its financial contribution to defense. The preliminary negotiations have shown that after the transitional period the Germans will be reluctant to grant Allied forces a further degree of support than afforded EDC forces.

The following questions should be discussed and, if possible, settled by the three Foreign Ministers, who may then wish to take them up with the Federal Chancellor.

Total Contribution 1952/53

1. Should the Foreign Ministers emphasize to the Chancellor the necessity for an immediate acceptance by the Federal Government of the findings of the Three Wise Men relating to the total contribution and the categories of expenditures to be included in it?

Division of the Contribution 1952/53

2. Should the Foreign Ministers ask the Chancellor to confirm that the division of the contribution for 1952/53 will be finally negotiated in Bonn and written into the contract?

3. Are the Foreign Ministers prepared to accept that the funds for the support of Allied Troops should be paid by EDC out of the German contribution to it?

Contribution in Future Years

4. Should the Foreign Ministers ask the Chancellor to agree to express the continuing obligation as an obligation for the support of the Allied Forces and for the German contribution to the European Defense Community and not merely as a German obligation to the European Defense Community?

5. Do the Foreign Ministers agree that the German total contribution in 1953/54 and thereafter should be fixed in the same way as the contribution of the other EDC countries, without prejudging the question of the Federal Republic’s admission to NATO? Should this be written into the contract?

6. Should the High Commission include in the contract the method by which the German contribution for 1953/54 and thereafter will be divided?

Material Support

7. Should the Foreign Ministers ask the Chancellor whether the Federal Government will agree to the special arrangements required for the material support of the Allied Forces in Germany (e.g. supply, transport, communications, housing, etc.) continuing for the duration of the contract; although these arrangements may differ from the corresponding arrangements which will be fixed by the European Defense Community for the treatment of the Forces of the Community which are given in another member country? The Federal Authorities have indicated that they would agree to special arrangements from the date the treaty enters into force until the end of the calendar year 1952.

1. This report was discussed at the tripartite meeting in London on Feb. 17; see telegram Secto 11, Feb. 18, from London, p. 58.
2. For a record of that meeting, see telegram 3086, Nov. 22, 1951, in Foreign Relations, 1951, vol. iii, Part 2, p. 1605.
3. The annexed summaries are not printed here. For additional documentation on the continued participation of the United States in discussions on establishing contractual relations with the Federal Republic, see volume vii .
4. The text of the proposed General Agreement (General Convention) between the three occupation powers and the German Federal Republic is printed in Foreign Relations, 1951, vol. iii, Part 2, p. 1592.
5. Regarding these Bundestag resolutions, see telegram 1499, Feb. 9, from Bonn, p. 611.
6. The resolutions are not printed here; for the texts, see Documents (R.I.I.A.) for 1952, pp. 76–79 or 10th Report on Germany, pp. 86–88.
7. The reference here is to one of the final reports of the Intergovernmental Study Group on Germany which had been convened in London in 1950 and concluded its activities in February 1951. For documentation on the concluding activities of the Intergovernmental Study Group (London Study Group), see Foreign Relations, 1951, vol. iii, Part 2, pp. 1344 ff. Regarding the document in question, see ibid., footnote 5, p. 1409.
8. The reference here is to the Temporary Council Committee of the North Atlantic Council; for an account of one of the discussions between Executive Board of the TCC and West German officials, see telegram 4927, Feb. 12, from Paris, p. 32.